Vietnam jumps into the world’s fragrance rice market

VietNamNet Bridge – IR 50404, a normal rice variety, is grown in 70 percent of the area of the winter-spring crop. However, exporters only hunt for fragrant rice, because the fragrance rice price is double the normal price.

The Vietnam Food Association (VFA) has got the nod from the government to its proposal to borrow money with no interest rate, to collect rice to store for three months.

However, at the press conference held some days ago to announce the rice collection plan, Pham Van Bay, Deputy Chair of VFA, repeatedly said that enterprises would prioritize to buy fragrance rice, and they would consider buying normal rice later. He explained that at this moment, the world’s demand for low grade rice is very weak.

In the first two months of the year, Vietnam exported 627,000 tons of rice of different kinds, worth 319 million dollars. However, only 6.45 percent of the exports were normal rice, while the majority of the amount was fragrance rice, sticky rice and parboiling rice. Hong Kong and China remain the two biggest consumers of Vietnamese fragrance rice.

Tran Ngoc Trung, General Director of Vinh Phat Rice Company, said he has just led a Hong Kong’s businessmen group to fragrant rice in An Giang and Can Tho provinces, and to the company’s rice processing factory in An Giang province. Trung has found out that the Hong Kong’s businessmen have expressed their interest in the rice cultivation process, and the rice processing method being applied by Vietnamese enterprises.

In fact, Vietnam began exporting fragrance rice in big quantity in 2011 already. Vietnamese fragrant rice accounted for 30 percent (135,000 tons) of the total fragrant rice imported by Hong Kong. In January and February, Vietnamese enterprises sold fragrant rice to Hong Kong at 600-700 dollars per ton, which is twice expensive as the low grade rice (15-25 percent broken rice).

This explains why enterprises are hunting for fragrant rice (jasmine and VD20), accepting the high price of 7000 dong per kilo, or 2000 dong per kilo higher than the normal rice.

Huynh Minh Hue, VFA’s Secretary General said China is seeking to purchase 200,000 tons of fragrant rice, while enterprises have nothing to sell.

Developing scented rice area?

Economists say that Vietnam had never before been listed among the scented rice exporters. However, it has been gradually squeezing into the fragrant rice market in recent years.

The great opportunity has come when Thai fragrant rice has become less competitive in prices, since the government of Thailand applies a subsidy policy, under which farmers sell rice at high prices.

As a result, the clients from Hong Kong, China, South Korea, Europe and South America, who were once the loyal importers of Thai rice, have shifted to buy Vietnamese rice which is 30 percent cheaper.

Kenneth Chan, Chair of the Hong Kong’s Rice Businessmen’s Association, has also admitted that Vietnamese fragrant rice is more attractive than Thai rice, and that Hong Kong’s businessmen would seek supply sources in Vietnam instead of Thailand.

However, scientists have warned that Vietnam should think twice about if it would develop the fragrant rice growing area. Le Van Banh, Head of the Mekong Delta Rice Institute, said that it is difficult to increase the scented rice area in Mekong Delta’s provinces. 15-20 percent of the area is reserved for normal rice, 10-15 percent for scented rice, while the remaining area for high grade rice (5-10 percent broken rice). He stressed that it is necessary to maintain the high percentage of high grade rice growing area because of the high demand in the world.

Banh has warned that if Vietnam rushes to grow scented rice, it may happen that scented rice would be unsalable in the future.